Industrial Markets Nationwide Hit Record High Rents, Low Vacancy Rates
By Rebecca Baird-Remba August 6, 2021 4:55 pm
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As the pandemic drags on into its second year, e-commerce companies have helped fuel record-low vacancy rates and high asking rents in industrial properties across the nation, according to JLL’s second-quarter industrial report.
The brokerage found that industrial rents in the second quarter were among the highest on record, reaching $6.62 per square foot, and rents increased year-over-year by 5.1 percent. The report predicts that rents will continue to grow between 4 and 7 percent in 2021 and 2022.
Preleased space also hit a record high of 61 percent in the second quarter of 2021, driven by big-box users looking for 500,000 square feet or more of warehouse space. The net absorption of industrial space in the second-quarter was the highest on record, at 107 million square feet.
JLL (JLL) found that the construction of industrial space was unable to keep up with demand and leasing this year, because e-commerce tenants continue to expand and there is a limited amount of industrial land near major cities.
In Los Angeles, the first and second quarters of 2021 were two of the busiest in recent history. The second quarter alone saw 9.8 million square feet of space leased, the majority of which was taken by logistics and port-related companies. Los Angeles remains a huge international shipping hub, with a port that received one million 20-foot shipping containers in May.
Warehouses in Los Angeles reached record low vacancy rates, with only 1.9 percent of space vacant this past quarter, and even less in the three submarkets closest to the port. Asking rents are at $1 a square foot and expected to increase, according to the report.
Developers have broken ground on several new industrial projects in the South Bay and San Gabriel Valley recently, which will help ease the tight L.A. industrial market and its rent growth. The region has roughly 3.4 million square feet of warehouse space under construction.
New Jersey’s industrial market also continues to boom, with 12.3 million square feet leased in the second quarter. E-commerce users accounted for a significant chunk, roughly 3.2 million square feet, of that leasing volume. Third-party logistics companies also inked about 2.2 million square feet in the Garden State last quarter. Tenants are currently seeking about 26 million square feet of industrial space statewide. Vacancy hit a record-low 2.2 percent this quarter, while direct asking rents for warehouses continue to rise, reaching an average of $10.47 a square foot.
New York City’s industrial market remains incredibly tight as well. Roughly 20 leases spanning 700,000 square feet were inked in the second quarter of 2021. The two largest deals included a large e-commerce tenant signing 226,729 square feet in Flushing, Queens, and 134,000 square feet in the South Bronx.
On the investment sales side, CenterPoint Properties picked up a 144,000-square-foot warehouse for $117 million in the South Bronx, and Madison Capital dropped $45 million on a pair of Red Hook, Brooklyn, industrial properties.
Vacancy is hovering around 1.7 percent, with no new industrial space delivered in the five boroughs this year, according to JLL. Roughly 2.7 million square feet of industrial space is under construction and expected to be complete by the second quarter of 2022, and an additional 5 million square feet is expected to begin construction within the next two years.
Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.
